On Friday, UBS initiated coverage on Fluidra SA (FDR:SM) stock, a company specializing in swimming pool equipment, with a Buy rating and a price target of €26.00. UBS's assessment is based on Fluidra's solid performance in the market, including approximately 7% organic growth, a margin profile over 20%, and nearly 100% cash conversion.
The financial institution's outlook is positive, anticipating a 50% earnings increase from 2024 to 2026, which is expected to be driven by both margin expansion and a re-acceleration of top-line growth. UBS predicts that the company's earnings multiple will undergo a re-rating, with the €26.00 price target reflecting a modest 10% re-rating from current levels.
According to UBS, the current share price of Fluidra only accounts for a mid-cycle growth of 4%, which is conservative compared to UBS's base case of 6%. Furthermore, the market appears to be underestimating Fluidra's potential for margin improvement, pricing in an adjusted EBITA margin of 17.5% against a 2019-2023 average of 17%. This stands in contrast to UBS's mid-term estimate of a 22% adjusted EBITA margin.
UBS highlighted the attractive investment opportunity presented by Fluidra, noting that there is over 30% upside potential to the current share price. This comes after a recent decline in the stock's value, which UBS views as a favorable entry point for investors as the pool industry gears up for its next growth phase.
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